UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended January 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission file number 0-8422
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TRANSACT INTERNATIONAL INC.
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(Exact name of small business issuer as specified in its charter)
CONNECTICUT 06-0732124
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
22 THORNDAL CIRCLE, DARIEN, CONNECTICUT 06820
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(Address of principal executive offices)
(203) 656-0777
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or
for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity as of the latest practical date: 6,123,235
as of February 15, 1997.
Transitional Small Business Disclosure Format YES NO X
--- ---
1
TRANSACT INTERNATIONAL INC.
FORM 10-QSB - Quarter Ended January 31, 1997
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets
January 31, 1997 (Unaudited) and April 30, 1996 3
Statements of Operations (Unaudited)
Three and Nine Months Ended January 31, 1997
and January 31, 1996 4
Statements of Cash Flows (Unaudited)
Nine Months Ended January 31, 1997 and
January 31, 1996 5
Notes to the Financial Statements (Unaudited) 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 9
SIGNATURE 10
2
PART I : FINANCIAL INFORMATION
TRANSACT INTERNATIONAL INC.
BALANCE SHEETS
JANUARY 31, APRIL 30,
1997 1996
------------ ----------
ASSETS (UNAUDITED)
CURRENT ASSETS
Cash $ 126,863 $ 287,986
Accounts receivable, net of allowance for doubtful
accounts of $96,000 and $92,000 respectively 1,183,343 1,021,320
Inventories 299,316 406,750
Costs and estimated earnings in excess of billings on
incomplete contracts 225,017 329,063
Prepaid expenses and other current assets 11,716 68,263
------------ ----------
TOTAL CURRENT ASSETS 1,846,255 2,113,382
------------ ----------
PROPERTY, PLANT AND EQUIPMENT, at cost 285,939 277,727
Less accumulated depreciation (242,709) (215,648)
------------ ----------
43,230 62,079
OTHER ASSETS 2,300 2,300
------------ ----------
TOTAL ASSETS $1,891,785 $2,177,761
============ ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Short-term borrowings $ --- $150,000
Accounts payable 1,468,187 1,555,119
Accrued expenses 395,668 368,311
Current portion of long-term debt 122,319 82,352
Billings in excess of costs and estimated earnings on
incomplete contracts 17,579 209,707
------------ ----------
TOTAL CURRENT LIABILITIES 2,003,753 2,365,489
LONG-TERM DEBT 75,000 ---
------------ ----------
TOTAL LIABILITIES 2,078,753 2,365,489
------------ ----------
STOCKHOLDERS' DEFICIENCY
Preferred stock, no par value, authorized
2,000,000 shares, none issued --- ---
Common stock, no par value, authorized
12,000,000 shares, issued 6,201,735 852,541 852,541
Additional paid-in capital 5,224,726 5,224,726
Treasury stock, at cost : 78,500 shares (29,606) (29,606)
Deficit (6,234,629) (6,235,389)
------------ ----------
TOTAL STOCKHOLDERS' DEFICIENCY (186,968) (187,728)
------------ ----------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIENCY $1,891,785 $ 2,177,761
============ ==========
SEE NOTES TO FINANCIAL STATEMENTS.
3
TRANSACT INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- --------------------------
1/31/97 1/31/96 1/31/97 1/31/96
---------- ---------- ----------- ----------
NET SALES $1,432,626 $1,488,820 $6,216,185 $5,368,203
---------- ---------- ----------- ----------
COSTS AND EXPENSES :
Cost of sales 1,240,901 1,495,595 5,272,537 4,931,395
Selling and administrative 237,416 397,313 927,607 1,237,264
---------- ---------- ----------- ----------
1,478,317 1,892,908 6,200,144 6,168,659
---------- ---------- ----------- ----------
INCOME (LOSS) FROM OPERATIONS (45,691) (404,088) 16,041 (800,456)
---------- ---------- ----------- ----------
OTHER INCOME (EXPENSE) :
Interest expense (5,165) (7,045) (17,081) (14,082)
Other income 1,042 44 1,800 2,287
---------- ---------- ----------- ----------
(4,123) (7,001) (15,281) (11,795)
---------- ---------- ----------- ----------
NET INCOME (LOSS) $ (49,814) $(411,089) $ 760 $(812,251)
========== ========== =========== ==========
NET INCOME (LOSS) PER SHARE
OF COMMON STOCK $ (0.01) $ (0.07) $ 0.00 $ (0.13)
========== ========== =========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,123,235 6,123,235 6,123,235 6,123,235
========== ========== =========== ==========
SEE NOTES TO FINANCIAL STATEMENTS.
4
TRANSACT INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
1/31/97 1/31/96
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OPERATING ACTIVITIES :
Net income (loss) $ 760 (812,251)
Adjustments to reconcile net income (loss) to cash
(used in) provided by operations:
Depreciation of property, plant and equipment 27,061 26,485
Changes in assets and liabilities :
Decrease(increase) in accounts receivable (162,023) 749,242
Decrease in inventories 107,434 51,281
Decrease in other current assets 56,547 6,256
(Increase) in costs and estimated earnings in
excess of billings on incomplete contracts
- net (88,082) (687,424)
Decrease in other assets --- 35,388
Increase (decrease) in accounts payable
and accrued expenses (59,575) 536,601
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NET CASH USED IN OPERATIONS (117,878) (94,422)
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INVESTING ACTIVITIES :
Capital expenditures (8,212) (9,890)
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FINANCING ACTIVITIES :
Net proceeds - short-term borrowings --- 150,000
Repayment of debt (35,033) (67,883)
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NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (35,033) 82,117
--------- ---------
NET DECREASE IN CASH (161,123) (22,195)
CASH, BEGINNING OF PERIOD 287,986 140,950
--------- ---------
CASH, END OF PERIOD $126,863 $118,755
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION :
Cash paid during the period for:
Interest $17,081 14,082
Income taxes --- ---
SEE NOTES TO FINANCIAL STATEMENTS.
5
TRANSACT INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
1. The accompanying financial statements have been prepared assuming that
Transact International Inc. (the "Company") will continue as a going
concern. The Company's ability to continue as a going concern is hampered
by the matters discussed in the next three sentences. The Company has a
stockholders' deficiency and working capital deficiency of $186,968 and
$157,498, respectively, at January 31, 1997. The Company's sales backlog
is $2.8 million at January 31, 1997 and the Company is seeking additional
orders and exploring the sale or licensing of certain product lines that
would enable the Company to continue as a going concern. However, there
is no assurance that the Company will be successful in attaining
additional profitable orders or in selling or licensing certain product
lines.
The balance sheet as of January 31, 1997, the statements of operations for
the three and nine months ended January 31, 1997 and 1996 and the
statements of cash flows for the nine months ended January 31, 1997 and
1996 have been prepared by the Company, without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, the
results of operations and cash flows at January 31, 1997 and all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's April 30, 1996
annual report to stockholders. Seasonality is not a major factor in the
Company's operations. The results of operations for the three and nine
month periods ended January 31, 1997 are not necessarily indicative of
those for a full fiscal year.
2. Inventories consist of raw materials and manufacturing supplies at January
31, 1997 and April 30, 1996.
3. Amounts per share have been computed using the weighted average number of
common shares outstanding during each period. No effect has been given to
shares issuable pursuant to outstanding options as their effect would be
antidilutive.
4. There was no benefit for income taxes in the three and nine month periods
ended January 31, 1997 and 1996, as the loss generated cannot be carried
back to offset income in prior years.
The Company has operating loss carryovers and investment tax credit
carryforwards for tax return purposes of approximately $6,100,000 and
$104,000 respectively, expiring in 1997 through 2010.
6
TRANSACT INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
(CONTINUED)
The tax effects of temporary differences giving rise to the Company's
deferred tax assets at January 31, 1997 are approximately as follows :
Net operating loss carryforward $2,250,000
Investment tax credit carryforward 104,000
Other reserves and liabilities 128,000
----------
2,482,000
Valuation allowance 2,482,000
----------
$ ---
==========
Due to the Company's cumulative losses, management does not consider that
enough support to overcome the "more likely than not" criteria existed at
January 31, 1997 to record a deferred tax asset. As a result, for
financial reporting purposes, deferred tax assets are fully reduced by a
valuation allowance.
5. In January 1997, the Company converted its short-term bank note payable to
a term loan payable, to the same bank, in twenty four equal monthly
principal installments of $6,250 commencing February 15, 1997. The term
loan bears interest at 1% over the bank's prime lending rate (the bank's
prime lending rate was 8 1/4 % at January 31, 1997).
7
TRANSACT INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Sales for the three months ended January 31, 1997 compared to the three months
ended January 31, 1996 declined 3.7%. The gross profit for the quarters ended
January 31, 1997 and 1996 were 13.3% and 0% respectively. The current quarters
gross profit was adversely effected by lower sales than anticipated and small
cost overruns on a project. The gross profit margins for the three months
ended January 31, 1996 were adversely affected by a low volume of transfer ball
sales which have a higher gross profit margin and cost overruns on a project
that was completed in November 1995.
Sales for the nine months ended January 31, 1997 compared to the comparable
period last year increased $847,982 or 15%. This increase resulted from the
increased sales of transfer balls net of a decrease in ramp equipment sales.
Gross profit percentages for the nine months ended January 31, 1997 and 1996
were 15.0% and 8.1% respectively. The increase in gross margins in 1997 were
primarily due to (i) an increase in sales of transfer balls which have a
higher gross profit percentage than projects and ramp equipment, and (ii) cost
overruns in the nine months ended January 31, 1996 for a project that
represented approximately 27% of such revenues. This project was completed in
November 1995.
For the three and nine months ended January 31, 1997 compared to the comparable
periods last year the Company reduced its selling and administrative expenses
$159,897 and $309,657 respectively, primarily related to compensation and
employee benefit costs.
The Company's sales backlog as of January 31, 1997 and January 31, 1996 was
approximately $2.8 million and $3.8 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES:
At January 31, 1997, the Company has a working capital deficiency of $157,498.
During the nine months ended January 31, 1997 the Company used approximately
$118,000 of cash in its operations.
The Company's ability to continue in business is dependent upon its ability to
increase profitability and/or sell or license certain product lines. The
Company's sales backlog is $2.8 million at January 31, 1997 and the Company is
seeking additional orders and exploring the sale or license of certain product
lines that would enable the Company to continue as a going concern. However,
there is no assurance that the Company will be successful in attaining
additional profitable orders or in selling or licensing certain product lines.
8
PART II: OTHER INFORMATION
TRANSACT INTERNATIONAL INC.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSACT INTERNATIONAL INC.
Registrant
/s/ Bruno S. Frassetto
DATE: MARCH 12, 1997 ------------------------------------
BRUNO S. FRASSETTO
President and Acting Chief
Financial and Accounting Officer
10